STATE OF ALASKA

ALASKA OIL AND GAS CONSERVATION COMMISSION

333 West Seventh Avenue, Suite 100

Anchorage Alaska 99501

Re: THE APPLICATION OF Marathon Oil ) Conservation Order No. 460
Company ("Marathon") for an order granting )
an exception to the spacing requirements of ) Susan Dionne #1
20 AAC 25.055(a)(2) to provide for the ) Workover and Testing
work over and testing of the Susan Dionne #1 )
exploratory well in an undefined gas pool ) December 4, 2001
IT APPEARING THAT:

1. Marathon Oil Company ("Marathon") by letter dated September 6, 2001, requested an exception to the well spacing provisions of 20 AAC 25.055(a)(2). The exception would allow the proposed Susan Dionne #1 exploratory well to be re-entered and test produced for gas at a location that is within 1,500 feet of a property line where both owners and landowners change.

2. The Commission published notice of opportunity for public hearing in the Anchorage Daily News on September 24, 2001, pursuant to 20 AAC 25.540.

3. No protests to the application were received.

FINDINGS:

1) The Susan Dionne #1 well was formerly known as the McCoy Prospect #1 well, and before that it was known as the Ninilchik #1 well.

2) The surface location of this well is 1,489 feet from the east line (FEL) and 144 feet from the south line (FSL) of Section 6, T1S, R13W, Seward Meridian (SM). Union Oil Company of California ("Unocal") drilled the well to a total depth of 14,940 feet measured depth (14,777 feet true vertical depth), and subsequently plugged and abandoned it in 1962. The bottom hole location of the original well bore is 3,081 feet FEL and 652 FSL of Section 6, T1S, R13W, Seward Meridian (SM).

3) The history of operations within the well from 1962 through 1993 is presented in Conservation Order No. 211 (issued August 19, 1985) and in Conservation Order No. 309 Revised (issued March 18, 1993).

4) In November of 1985, Far North Oil and Gas, Inc. re-entered and cleaned the well out to 3,890 feet measured depth, which is 1,680 feet FEL and 133 feet FSL of Section 6, T1S, R13W, Seward Meridian (SM). The well was perforated from 3,776 to 3,786 feet measured depth, tubing and a packer were run, a tubing hanger was installed, a production tree was installed and tested, the well was swabbed, and gas was flared. Estimated production rates are presented on the Well Completion or Recompletion Report and Log for the well dated December 30, 1985, and received by the Commission on January 4, 1993.

5) On August 23, 1995, the Commission received an Application for Sundry Approvals, dated August 23, 1995, from Alaskan Crude Corporation ("ACC") requesting approval to flow test the McCoy Prospect #1 well. Approval was granted by the Commission on August 29, 1995.

6) On August 22, 2000, ACC submitted an application dated August 18, 2000 for sundry approval to flow test the McCoy Prospect #1 well. The Commission approved the application on September 15, 2000.

7) On December 15, 2000, the Alaska Department of Natural Resources (DNR) approved James W. White's assignment of 100 percent working interest in the tract containing Section 6, T1S, R13W, SM to Unocal. The effective date of the assignment is December 1, 2000. On March 9, 2001, DNR approved Unocal's assignment of 40 percent working interest in the tract to Marathon, effective February 1, 2001.

8) On September 13, 2001, Marathon requested, by letter dated September 6, 2001, an exception to the well spacing provisions of 20 AAC 25.055(a)(2) in order to work over and test produce for gas the existing Susan Dionne #1 well at a location that is within 1,500 feet of a property line where both owners and landowners change.

9) Marathon presented a structure map of the top of the Tyonek T2 sand in the Susan Dionne #1 vicinity. Marathon's structural interpretation of the subject area indicates the proposed work over target zone for testing in Susan Dionne #1 is located near the top of the geologic structure.

10) Testing of the Susan Dionne #1 well is necessary to determine the presence of productive gas reservoir(s).

11) On October 19, 2001, by letter dated October 18, 2001, Marathon submitted a request for sundry approval of the work over and testing for the Susan Dionne #1 well with supporting proposed testing procedures.

12) Marathon has made reasonable and diligent efforts to identify, locate, and contact all offset owners, landowners, and operators of all wells within 3,000 feet of the proposed work over target in the Susan Dionne #1 well.

CONCLUSIONS:

1) An exception to 20 AAC 25.055(a)(2) is necessary to allow testing gas production of the Susan Dionne #1 well.

2) Granting a spacing exception to allow reasonable test production of the Susan Dionne #1 well will not result in waste or jeopardize the correlative rights of adjoining or nearby owners.

3) Granting this spacing exception is reasonably necessary to provide Marathon with an opportunity to establish the volume of gas reserves in the general area.

4) Before regular production is permitted from the Susan Dionne #1 well, the Commission must take such action as will offset any advantage which the person securing the exception may have over other producers by reason of the working over of the well as an exception, and so that drainage to the tract with respect to which the exception is granted will be prevented or minimized. AS 31.05.100(b).

NOW, THEREFORE, IT IS ORDERED:

Marathon's application for exception to the well spacing provisions of 20 AAC 25.055 (a)(2) for the purpose of working over and testing the Susan Dionne #1 well is approved. If the well proves capable of hydrocarbon production, regular production will not be permitted until the Commission establishes a drilling unit for the pool and issues an order integrating the interests of owners within the drilling unit, absent voluntary integration by the owners.

DONE at Anchorage, Alaska and dated December 4th, 2001.

Cammy Oechsli Taylor, Chair
Alaska Oil and Gas Conservation Commission

Daniel T. Seamount, Jr., Commissioner
Alaska Oil and Gas Conservation Commission

Julie M. Heusser, Commissioner
Alaska Oil and Gas Conservation Commission

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